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World shares' gains flag as China plan awaited

Shares in China had advanced 0.8%, while MSCI's main index of Asia-Pacific shares outside Japan added 0.1% in a choppy session

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Reuters London
Last Updated : Nov 12 2013 | 5:12 PM IST
A rally in world shares paused on Tuesday as investors awaited China's new 10-year economic plan, while revived speculation about the timing of US stimulus withdrawal drove the dollar towards 100 yen.

China's leaders will unveil a reform agenda for the next decade later which could include plans for slower growth as it seeks to rebalance the world's second largest economy while preserving stability.

Markets will scrutinise the blueprint for clues to likely infrastructure spending, which is key to commodity demand, and for any monetary policy measures to dampen a property boom.

"It's a 10-year plan of course, so it's one thing to announce it but another thing to implement it," said Josh Raymond, market strategist at City Index.

Ahead of the announcement, shares in China had advanced 0.8 percent, while MSCI's main index of Asia-Pacific shares outside Japan added 0.1 percent in a choppy session.

A broader gauge of global equity markets, the MSCI world equity index, was largely unchanged while European shares drifted lower in early trade, weighed down by a spate of disappointing company updates.

Half of the 80 percent of Stoxx Europe 600 companies that have reported so far have missed profit forecasts, and nearly two-thirds have missed revenue forecasts, according to data from Thomson Reuters StarMine.

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"Earnings in general have been OK, but it's not a blowout, and the revenues have been disappointing," said Mike Harris, partner at TJM Partners.

DOLLAR DIFFERENTIAL

The dollar meanwhile has rallied to a seven-week high against the yen, driving Japan's Nikkei index to a three-week high, as investors bet the U.S. Federal Reserve will start scaling back its stimulus sooner than had been expected.

The prospect of a early policy shift has led to a sharp rise in U.S Treasury yields as central banks in the euro zone and Japan pursue looser policies to support growth, widening the interest rate differential in favour of the greenback.

U.S. 10-year note yields were up 3.5 basis points at 2.78 percent in European trading, resuming their rise after a Veterans' Day holiday on Monday.

Traders said if the benchmark U.S. yield stayed above 2.75 percent for a sustained period it could herald a move towards 3 percent, last seen in early September, when markets initially anticipated the Fed would begin to reduce its asset purchases.

German 10-year government bonds yields were being dragged higher by the move in Treasuries, rising 2.4 bps to 1.78 percent.

A thin economic data calendar left the debt market awaiting speeches from Fed officials Dennis Lockhart and Narayana Kocherlakota for further hints on when the U.S. central bank might start trimming its $85 billion-a-month of bond-buying.

China's dominance as a consumer of many raw materials meant commodities trading was cautious ahead of the announcement of Beijing's new economic plan.

Three-month copper on the London Metal Exchange slipped 0.3 percent to $7,150 a tonne, while gold hovered just below $1,300 an ounce.

Brent crude oil slipped 0.3 percent to below $106 a barrel, under additional pressure from expectations for a rise in U.S. stockpiles in data due out later in the day.

 

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First Published: Nov 12 2013 | 4:11 PM IST

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